Michael Hudson on the Coming Global Fracture as Economic Orders Clash

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Yves here. Yet another interview with Micheal Hudson, centering on his new book, The Destiny of Civilization. Here, he focuses on the intensifying competition between the finance-led US and its economic allies in the West versus the manufacturing/real economy powerhouses of China and Russia. As the importance of propaganda in the Ukraine conflict demonstrates, the ideological war is as hard fought as the material one.

From an interview with the newly founded German magazine “ViER” on June 1 which will be published in August 2022.”  ViER (FOUR), stands for the media as fourth power in checks and balances.

(1.) Prof. Hudson, your new book “The Destiny of Civilization” is out now. This lecture series on finance capitalism and the New Cold War presents an overview of your unique geo-political perspective.

You talk about an ongoing ideological and material conflict between financialized and de-industrialized countries like United States against the mixed-economies of China and Russia. What is this conflict about and why is the world right now at a unique “point of fracture” as your book states?

Today’s global fracture is dividing the world between two different economic philosophies: In the US/NATO West, finance capitalism is de-industrializing economies and has shifted manufacturing to Eurasian leadership, above all China, India and other Asian countries in conjunction with Russia providing basic raw materials and arms.

These countries are a basic extension of industrial capitalism evolving into socialism, that is, into a mixed economy with strong government infrastructure investment to provide education, health care, transportation and other basic needs by treating them as public utilities with subsidized or free services for these needs.

In the neoliberal US/NATO West, by contrast, this basic infrastructure is privatized as a rent-extracting natural monopoly.

The result is that the US/NATO West is left as a high-cost economy, with its housing, education and medical expenses increasingly debt financed, leaving less and less personal and business income to be invested in new means of production (capital formation). This poses an existential problem for Western finance capitalism: How can it maintain living standards in the face of de-industrialization, debt deflation and financialized rent-seeking impoverishing the 99% to enrich the One Percent?

The first U.S. aim is to deter Europe and Japan from seeking a more prosperous future to lie in closer trade and investment ties with Eurasia and the Shanghai Cooperation Organization (SCO, a more helpful way of thinking about the global fracture from the BRICS). To keep Europe and Japan as satellite economies, U.S. diplomats are insisting on a new economic Berlin Wall of sanctions to block trade between East and West.

For many decades U.S. diplomacy has meddled in European and Japanese internal politics, sponsoring pro-neoliberal officials into government leadership. These officials feel that their destiny (and also their personal political fortunes) is closely allied with U.S. leadership. Meanwhile, European politics has now become basically NATO politics run from the United States.

The problem is how to hold the Global South – Latin America, Africa and many Asian countries – in the US/NATO orbit. Sanctions against Russia have the effect of hurting the trade balance of these countries by sharply raising oil, gas and food prices (as well as prices for many metals) that they must import. Meanwhile, rising U.S. interest rates are drawing financial savings and bank credit into U.S.-dollar-denominated securities. This has raised the dollar’s exchange rate, making it much harder for SCO and Global South countries to pay their dollarized debt service falling due this year.

This forces a choice on these countries: either go without energy and food in order to pay foreign creditors – thereby putting international financial interests before their domestic economic survival – or defaulting on their debts, as occurred in the 1980s after Mexico announced in 1982 that it could not pay foreign bondholders

(2.) How do you see the ongoing war/special military operation in Ukraine? Which economic consequences do you foresee?

Russia has secured the Russian-speaking Eastern Ukraine and its southern Black Sea coastline. NATO will continue to “poke the bear” by sabotage and new ongoing attacks, especially by Polish fighters.

NATO countries have dumped their old and obsolete weapons into Ukraine, and now must spend immense sums modernizing their military hardware. The outflow of payments to the U.S. military-industrial complex will put downward pressure on the euro and British sterling – all coming on topo of their own rising energy and food deficits. So the euro and sterling are headed down toward parity with the U.S. dollar. The euro is almost there now (about $1.07). This means sharply rising price inflation for Europe.

I read and hear conflicting information on the new sanctions. Some experts in the East and West believe this will harm the national economy of the Russian Federation tremendously. Other experts tend to believe this will backfire or have a huge boomerang-effect on the Western countries indeed.

The overriding U.S. policy is to fight against China, hoping to break of the Western Uighur regions and divide China into smaller states. To do that, it is necessary to break away Russian military and raw-materials support for China – and in due course to break it up into a number of smaller states (the Western large cities, northern Siberia, a southern flank, etc.).

Sanctions were imposed in hopes of making living conditions so unpleasant for Russians that they would press for regime change. The NATO attack in Ukraine was designed to drain Russia militarily – by having the bodies of Ukrainians deplete Russia’s supply of bullets and bombs by giving their lives simply to absorb Russian arms.

The effect has been to increase Russian support for Putin – just the opposite of what was intended. There is a growing disillusion with the West, after seeing what the Harvard Boys did to Russia when the United States backed Yeltsin to create a domestic kleptocrat class that tried to “cash out” its privatizations by selling shares in oil, nickel and public utilities to the West, and then spurring military attacks from Georgia and Chechnya. There is a general agreement that Russia is making a long-term turn Eastward instead of Westward.

So the effect of U.S. sanctions and military opposition to Russia has been to impose a political and economic Iron Curtain locking in Europe to dependency on the United States, while driving Russia together with China instead of prying them apart. Meanwhile, the cost of European sanctions against Russian oil and food – much to the benefit of U.S. LNG gas suppliers and agricultural exporters – threatens to create long-term European opposition to U.S. unipolar global strategy. A new “Ami go home” movement is likely to develop.

But for Europe, the damage already has been done, and neither Russia nor China are likely to trust that European government officials can withstand the bribery and personal pressure brought to bear by U.S. interference.

Here in Germany I’m listening to the new Minister for Economy, Mr Robert Habeck from the Green Party, who talks about activating the federal “emergency gas” and asks the Emirates for resources (this “deal” seems to be failed already, news say). We see the end of North Stream II and huge dependency for Berlin and Brussels on Russian resources. How this will all sum up?

In effect, U.S. officials have asked Germany to commit economic suicide and bring on a depression, higher consumer prices and lower living standards. German chemical companies have already begun to shut down their fertilizer production, given Germany’s acceptance of trade and financial sanctions that prevent it from buying Russian gas (the raw material for most fertilizer). And German car companies are suffering from supply cut-offs.

These European economic shortages are a huge benefit to the United States, which is making enormous profits on more expensive oil (which is controlled largely by U.S. companies, followed by British and French oil companies). Europe’s replenishment of the arms that it donated to Ukraine also is a boon to the U.S. military-industrial complex, whose profits are soaring.

But the United States is not recycling these economic gains to Europe, which is looking like the big loser.

Arab oil producers already have rejected U.S. demands that they charge less for their oil. They look to be windfall gainers from the NATO attack on the Ukraine proxy battlefield.

It seems unlikely that Germany can simply give back to Russia Nord Stream 2 and the Gazprom affiliates that have conducted trade with Germany. Trust has been broken. And Russia is afraid to accept payments by European banks since the theft of $300 billion of its foreign reserves. Europe is no longer economically safe for Russia.

The question is just how soon Russia will simply stop supplying Europe altogether.

It looks like Europe is becoming an appendage of the U.S. economy, in effect bearing the fiscal burden of America’s Cold War 2.0, with no political representation in the United States. The logical solution is for Europe to join the United States politically, giving up its governments but at least getting a few Europeans in the U.S. Senate and House of Representatives.

(3.) Which role does the a) New Cold War and the b) neoliberal finance capitalism play in the current war between Russia and Ukraine? According to your recent research.

The US/NATO war in Ukraine is the first battle in what looks like a 20-year attempt to isolate the Dollar Area West from Eurasia and the Global South. U.S. politicians promise to keep the Ukraine war going indefinitely, hoping that this may become Russia’s “new Afghanistan.” But this tactic now looks like it may threaten to be America’s own Afghanistan. It is a proxy war, whose effect is to lock in Europe’s dependency on the United States as a client oligarchy with the euro as a satellite currency to the dollar.

U.S. diplomacy tried to disable Russia in three major ways. First, isolating it financially by blocking it from SWIFT bank clearing, system. Russia responded by smoothly moving over to China’s bank-clearing system.

The second tactic was to seizing Russian deposits in U.S. banks and holdings of U.S. financial securities. Russia responded by picking up U.S. and European investments in Russia on the cheap as the West dumped them.

The third tactic was to block NATO members from trading with Russia. The effect has been that Russian imports from the West have declined, while its exports of oil, gas and food are soaring. That has raised the ruble’s exchange rate instead of hurting it. And as sanctions block Russia’s imports from the West, President Putin has announced that his government will invest heavily in import substitution. The effect will be a permanent loss of Russian markets for European suppliers and exporters.

Meanwhile, the Trump tariffs against European exports to the United States remain in place, leaving European industry with shrinking business opportunities. The European Central Bank may continue to buy European stocks and bonds to protect the wealth of the One Percent, but if anything will cut back on domestic social spending so as to comply with the 3% limit of budget deficits that the eurozone has imposed on itself.

In the medium and long run, the US/NATO sanctions are therefore aimed mainly against Europe. And Europeans don’t even seem to see that they are the primary victims of this new U.S. economic war for self-serving energy, food and financial dominance.

(4.) In Germany the stopped energy project Nord Stream II is still a big political issue. In your recent online article “The Dollar Devours the Euro” you wrote: “It is now clear that today’s escalation of the New Cold War was planned over a year ago. America’s plan to block Nord Stream 2 was really part of its strategy to block Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.” Could you explain this to our readers?  

What you characterize as “blocking Nord Stream 2” is really a Buy-American policy. The United States has persuaded Europe not to buy in the lowest-price market, but to pay as much as seven times more for its gas from U.S. LGN suppliers, and to spend a reported $5 billion on expanding port capacity – that will not even be available for a year years.

This threatens a very uncomfortable interregnum for Germany and other European countries following U.S. dictates. Basically, national parliaments are now subservient to NATO, whose policies are run from Washington.

One price that Europe will pay, as noted above, is declining exchange rate against the U.S. dollar. European investors are likely to move their savings and investments out of Europe to the United States in order maximize their capital gains and simply avoid price declines for their stocks and bonds as measured in dollars.

(5.) Prof. Hudson, let’s take a look at further developments in Germany. In May the German parliament – Bundestag – passed a new bill: German lawmakers approved possible expropriation of energy companies. This could enable the Berlin government to put energy companies under trusteeship if they can no longer fulfil their tasks and if the security of supply is at risk. According to REUTERS, the renewed law – which still needs to pass the upper house of parliament – could be applied for the first time if no solution is found on the ownership of the PCK Refinery oil refinery in Schwedt/Oder (East Germany), which is majority-owned by Russian state-owned Rosneft.

It looks like Europe and America will confiscate Russian investments in their countries, and sell off (or have Russia confiscate) NATO-country investments in Russia. This means a de-linking of the Russian economy from the West, and a closer linking with China – which looks like the next economy to be sanctioned by NATO as it becomes an Eastern Pacific Treaty Organization involving Europe in tis confrontation in the China Sea.

I would be surprised if Russia resumes selling oil and gas to Europe without being reimbursed for what Europe (and also the United States) has seized. This demand would help bring European pressure on the United States to give back the $300 billion in foreign reserves that it has grabbed.

But even after such a give-back and reparations settlement, trade seems unlikely to be resumed. A phase change has occurred, a change in consciousness as to how the world is splitting up under U.S. diplomatic attacks on allies and adversaries alike.

My question would be: Socialism is a big topic in your new book. What’s your view on those “socialist” measures taken now by a capitalist country like Germany? (source: https://www.reuters.com/business/energy/german-lawmakers-approve-possible-expropriation-energy-companies-2022-05-12/)

A century ago, the “final stage” of industrial capitalism was expected to be socialism. There were many different kinds of socialism: State socialism, Marxian socialism, Christian socialism, anarchist socialism, libertarian socialism. But what occurred after World War I was the antithesis of socialism. It was finance capitalism and a militarized Finance capitalism.

The common denominator of all socialist movements, from the right to the left of the political spectrum, was stronger government infrastructure spending. The transition to socialism was being led (in the United States and Germany) by industrial capitalism itself, seeking to minimize the cost of living (and hence the basic living wage) and the cost of doing business by government investment in basic infrastructure, whose services were to be provided freely, or at least at subsidized prices.

That aim would prevent basic services from becoming opportunities for monopoly rent. The antithesis was the Thatcher-neoliberal doctrine of privatization. Governments turned over public utilities to private investors. Companies were bought on credit, adding interest and other financial charges to profits and payments to management. The result has been to turn neoliberal Europe and America into high-cost economies unable to compete in production prices with countries pursuing socialist polities instead of financialized neoliberalism.

This opposition in economic systems is the key to understanding today’s world global fracture.

(6.) Especially Russian oil and gas are in the focus right now. Moscow demands payments in Rouble only and is expanding their field of buyers filling it with China, India or Saudi-Arabia. But it seems Western buyers can still pay in Euro or US Dollar. What is your take on this ongoing war on resources? The Rouble appears to be a winner.

The rouble certainly is rising. But this does not make Russia a “winner” if its economy is disrupted by the sanctions blocking its own imports needed for its supply chains to operate smoothly.

Russia will end up the winner if it can mount an industrial import-substitution program, and re-create public infrastructure to replace what has been privatized under U.S. direction by the Harvard Boys in the 1990s.

Do we see the end of the petro-dollar and a rise of a new financial architecture in the East accompanied by a strengthening of BRICS and Shanghai Cooperation Organization (SCO)?

There will still be petrodollars, but also a variety of currency-area blocs as the world de-dollarizes its international trade and investment arrangements. In late May, Foreign Secretary Lavrov said that Saudi Arabia and Argentina want to join BRICS. As Pepe Escobar recently noted, BRICS+ may expand to include MERCOSUR and the South African Development Community (SADC).

These arrangements probably will call for a non-U.S. alternative to the IMF to create credit and provide a vehicle for official foreign-exchange reserves for the non-NATO countries. The IMF will still survive to impose austerity on U.S. satellite countries while subsidizing capital flight from Global South countries and creating SDRs to finance U.S. military spending abroad.

Summer 2022 will be a testing ground as Global South countries suffer a balance-of-payments crisis from the rising oil and food deficits alongside the higher domestic-currency costs of carrying their foreign dollar debts. The IMF may offer new SDRs for them to pay US dollar bondholders to keep the illusion of solvency going. But the SCO countries can offer oil and food – IF countries give assurances of repaying credit by repudiating their dollar debts to the West.

This financial diplomacy promises to introduce “interesting times.”

(7.) In your recent interview with Michael Welch (“Accidental Crisis?“) you have a specific analysis on the current events in Ukraine/Russia: “The war isn’t against Russia. The war isn’t against Ukraine. The war is against Europe and Germany.” Could you please elaborate on that?

As I explained above, the U.S. trade and financial sanctions are locking in Germany to dependency on U.S. exports of LNG, and purchases of US military arms to upgrade NATO into the de facto European Governing Authority.

The effect is to destroy any European hopes for mutual trade and investment gains with Russia. It is being turned into the junior partner (very junior) in its new trade an investment relations with the increasingly protectionist and nationalistic United States.

(8.) The real problem for United States seems to be this: “The only way of maintaining prosperity if you can’t create it at home is to get it from abroad.” What is Washington’s strategy in there?

My book Super Imperialism has explained how, for the past 50 years, ever since the United States went off gold in August 1971, the U.S. Treasury Bill standard has given the United States a free ride at foreign expense. Foreign central banks have recycled their dollar inflow resulting from the U.S. balance-of-payments deficit into loans to the U.S. Treasury – that is, to buy U.S. Treasury securities to hold their savings. This arrangement has enabled the United States to undertake foreign military spending for its nearly 800 military bases around Eurasia without having to depreciate the dollar or tax its own citizens. The cost has been borne by countries whose central banks have built up their dollar loans to the U.S. Treasury.

But now that it has become unsafe for countries to hold dollar-denominated U.S. bank deposits or government securities or investments if they “threaten” to defend their own economic interests or if their policies diverge from those dictated by U.S. diplomats, how can America continue to get a free ride?

In fact, how can it import basic materials from Russia to fill parts of its industrial and economic supply chain that is being broken down by the sanctions?

That is the challenge for U.S. foreign policy. One way or another, it aims to tax Europe and make other countries into economic satellites. The exploitation may not be as blatant as the U.S. grabbing of Venezuelan, Afghan and Russian official reserves. It is likely to involve undercutting foreign self-sufficiency to force other countries into economic dependency on the United States, so that the U.S. can threaten these countries with disruptive sanctions if they seek to put their own national interests over what U.S. diplomats want them to do.

(9.) How will all this affect Western Europe’s (Germany / France / Italy) balance of payments and hence the euro’s exchange rate against the dollar? And why do you think the European Union is on a path to become new “Panama, Puerto Rico and Liberia”?

The euro already is a satellite currency to the United States. Its member countries cannot run domestic budget deficits to cope with the coming inflationary depression resulting from the U.S.-sponsored sanctions and resulting Global Fracture.

The key is turning out to be military dependency. This is “cost sharing” for the U.S. sponsored Cold War 2.0. That cost sharing is what has led U.S. diplomats to realize that they need to control domestic European politics to prevent its populations and businesses from acting in their own interests. Their economic squeeze is “collateral damage” to today’s New Cold War.

(10.) A philosopher from Switzerland wrote a critical essay in mid of March for the German socialist newspaper „Neues Deutschland“, a former news outlet for the GDR government. Ms Tove Soiland criticized the international Left for current behaviours regarding Ukraine crisis and covid management. The Left, she says, is too much pro authoritarian government/state – and thereby copying methods of the traditional right-wing parties. Do you share this view? Or is it too harsh?

How would you answer this question, esp. regarding the thesis in your new book: “… the alternative path is broadly mixed-economy industrial capitalism leading to socialism …” (https://www.nd-aktuell.de/artikel/1162247.die-linke-und-corona-ein-postideologischer-totalitarismus.html)

The State Department and CIA’s “mighty Wurlitzer” has focused on gaining control of Europe’s Social Democratic and Labour parties, anticipating that the great threat to U.S.-centered finance capitalism will be socialism.  That has included the “green” parties, to the point where their pretense of opposing global warming is shown to be hypocritical in light of the vast carbon footprint and pollution of the NATO military warfare in Ukraine and related air force and naval exercises. You can’t be pro-environment and pro-war at the same time!

This has left the right-wing nationalist parties less influenced by U.S. political meddling. That is where the opposition to NATO is coming from, as in France and Hungary.

And in the United States itself, the only votes against the new $30 billion contribution to military spending against Russia came from Republicans. The entire “left wing” Democratic Party “squad” voted for the war spending.

The Social Democratic parties are basically bourgeois parties whose supporters have hopes of rising into the rentier class, or at least becoming stock and bond investors in miniature. The result is that neoliberalism has been led by Tony Blair in Britain and his counterparts in other countries. I discuss this political alignment in The Destiny of Civilization.

U.S. propagandists call governments that keep natural monopolies as public utilities “autocratic.” To be “democratic” means to let U.S. firms by control of these commanding heights, being “free” of government regulation and taxation of finance capital. So “left” and “right,” “democracy” and “autocracy,” have become an Orwellian Doublespeak vocabulary sponsored by America’s oligarchy (which it euphemizes as “democracy”).

(11.) Could the war in Ukraine be a landmark to show a new geopolitical map in the world? Or is the neoliberal New World Order on its rise? How do you see it?

As I explained in your Question #1, the world is being split into two parts. The conflict is not merely national by the West against the East, but is a conflict of economic systems: predatory finance capitalism against industrial socialism aiming at self-sufficiency for Eurasia and the SCO.

The non-aligned countries were not able to “go it alone” in the 1970s because they lacked a critical mass to produce their own food, energy and raw materials. But now that the United States has de-industrialized its own economy and outsourced its production to Asia, these countries have an option not to remain in dependency on U.S. Dollar Diplomacy.

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  1. Old Sovietologist

    “In effect, U.S. officials have asked Germany to commit economic suicide and bring on a depression, higher consumer prices and lower living standards”.

    I’m not sure there’s a country in history that has willing agreed to destroy its own economy like Germany has. Brexit looks a walk in the park compared to what the German political class is doing.

    1. CBBB

      The Germans sowed the seeds for this long ago with their austerity politics, low investment, and focus on exports as being the key source of demand. Those German auto companies pump out cars meant purely for export – Germans cannot afford them by-and-large.
      German industry is hostage to foreign consumers and does not exist without them. Europe should have built a self-sustaining economy with strong consumer demand and high standards of living. Instead after 2008 they choose a different path under German guidance.

      Now how can Germany go against the US? Their whole industry needs the US consumer – yes China is a big market now for them but I don’t think that’s sustainable for the Germans.

      1. lance ringquist

        shroeder was another nafta billy clinton and bomb them blair. he was responsible for those policies.

        from 1993 to 2008, thats all the fascist got out of nafta billy clintons criminal policies. ever since then its bomb others, steal from others, pound the 99% in the dirt in the vain attempt to get nafta billys disastrous policies working again.

        we saw the same thing out of the fascist prototype woodrew wilson. he single handedly rescued free trade from the trash can of history where it belonged, only to see that form of economics drag the whole world down again in 1929, which morphed into WWII.

        so no matter what the free traders do, its to no avail. under free trade economics almost everything goes into the hands of a few, making matters even worse for their brand of lunatic economics.

        1. H. Alexander Ivey

          This is a well done response. So why the ee cumming’s non-use of capital letters (and lack of tic marks)?
          Plus, Wilson died in 1919, so he could not have see the collapse of 1929.
          A pedantic ESL teacher and wanna-be editor.

          1. lance ringquist

            because i could care less about how my posts look. i am not after a “A” in grammar and punctuation.

            see wilsons 14 points, he foisted it on a weakened europe. plus he pushed the federal reserve down our throats, which is fascism.

            1. Wukchumni

              Wish I had a buck for every ‘nafta billy’ thrown out there.

              Repetition isn’t a good look, combined with sloppy punctuation, but as you say-you could care less.

              1. lance ringquist

                and i do not care. wish i had a buck for every asshole that has reminded me of my short comings going back to when i was a child.

                my stuttering, dyslexia, border line glaucoma, partial color blindness, plus being left handed to boot, and treated as a idiot and a laughing stock at school, besides the brutality.

                i can barely read, have a lot of trouble writing. but i have overcome it all.

                so you are in a very long long line of people that i will now ignore.

          2. lance ringquist

            H. Alexander Ivey, first off let me apologize. you most likely meant what you said as constructive criticism.

            most often that does not happen to me, so i failed to recognize it.

            1. podcastkid

              Been working some days, so couldn’t lollygag late here past few nights. Just now I took your style in the 6/3 comment as kind of an SOS Morse Code thing, or…telegram but in small case. Seemed to me in way appropriate. There is, after all, an emergency going on. Plus references to Wilson encourage reading.

      2. drumlin woodchuckles

        What happens when ” the American consumer” has been all the way pauperised? Who will buy the German cars then?

        1. lance ringquist

          i worked with neo-liberals, every last one of them say the little people have money, they just need to get turned upside down and shaken.

    2. Jake

      That’s precisely what every every neo-colony does under the influence of the so-called “rules based order,” including the United States. It’s a hollowing out of the real economy for the benefit of the FIRE sector.

      Hudson described this in many places, but most comprehensively (that I’ve seen) in his book, “Killing the Host.” Some of his other books describe how this process takes place, such as via dollar hegemony (“Superimperialism”) and by transforming the… ummm… discipline of economics into its opposite from the Classical Political Economy era (“J is for Junk Economics”). Most notably, over time and manipulation, the goal of free markets has shifted from markets FREE FROM rentier interests to markets FREE FOR rentier interests. A core argument of Hudson is that process is, by definition, destruction of your own economy.

      So, it’s actually much more difficult to find countries that refuse to engage in such real economy destroying behavior. One good place to look to find them? The U.S. sanctions list

  2. Edward H Jones

    This is a turning point and everyone is missing the turn. It is no longer about oil and gas, Oil and gas are over, Germany is completing the three largest electric grid infrastructure projects in the world to transfer North Sea Wind down to Germany and solar electric north to Norway. This is equal to about 10 nuclear plants worth of energy. Ms. Merkel is about 10 steps ahead on the chess board. Further there are currently 500,000 cars in electric manufacturing capacity in place and another 1,000,000 next year. Demand for gasoline has peaked. German homes can covert easily from natural gas to air to water heat pumps, the market has been making it happen for 10 years. Putin had to attack now to retain any semblance of legitimacy for his petro economy. The age of renewables is now driving the big player strategy. The only one that knows it is Merkel.

    1. GramSci

      I’m confused. If renewables are driving big player strategy, and Merkel is the only one who knows it, but Merkel is retired, who’s driving?

        1. AGR

          AI? Autonomous? Rogue? Science fact, fiction or the new mythology as allegorical narrative?

    2. nippersdad

      That sounds like a brochure from the German Chamber of Commerce. Average Germans can take comfort in the knowledge that it will be chock full of BTU’s, good for burning this Winter, when the polar winds howl outside the door.

      1. Polar Socialist

        To be honest, Germany, Denmark, Netherlands and Belgium did pledge to build 150 GW of North Sea wind power by 2050! At that point it may cover Germany’s non-carbon electricity generation needs.

        If it ever happens, because “the plan” is to finance the project mainly by private investors. The European experience with off-shore wind so far is that if the utilities don’t make very long term contracts, there will be no investment. And those contracts will be of higher price, because off-shore doesn’t really benefit from the scale and it degrades faster than turbines in less hostile environment.

        It’ll only happen if it’s done by state owned energy companies, and that’s kinda opposite of the current EU ideology groupthink.

        1. nippersdad

          That fits neatly into a post in links this morning from the IMF.


          Once one gets past the brain fog inducing code for “We view you all as cattle,” that is essentially what is on offer. In the meantime, they may wish that they hadn’t given away all of their tanks to Ukraine. Once Europe goes from street protests to guerrilla warfare, all of Haussman’s boulevards in the world will not suffice to keep down the kinds of protests that will come with the cold, hungry winters that the EU has mandated for its’ people.

    3. Reaville

      You could be right. If the Euros are not stupid, their strategy could be:
      1. Pay lip service to buying US LNG but have no intention of doing that long term
      2. Invest like crazy in renewables (they are doing this)
      3. Kiss off the US’s fossil fuel driven economy
      This would take skill and long range thinking that we’ve not seen to date. But, the planet is well on its way to being in hospitable to capitalism to the max, so maybe…?

  3. DJG, Reality Czar

    The situation in Italy differs from the current German economic suicide as described by Michael Hudson in one important respect. Italy seems to have thrown itself on the pyre a while back. This story has been gaining steam for a year—and it is causing a scandal in the last few days here:

    In short, the statistics show that Italy is the only European country in which salaries dropped, by 2.9 percent, over the course of 1990 to 2020. And then came COVID. Long form, in Italian:


    If you want to understand the reasons why Draghi was parachuted in: Someone has to try to get the economy going, and the pauperization of the populace has to be managed somehow. If you want to understand why the pro-Ukraine-war consensus broke down here in Italy almost immediately, well, look at the economics.

    It’s a wonder that the pro-war consensus seems to hold in Germany. I don’t get it.

    And to quote from the article (keeping in mind that mighty Lithuania is an artifact of the data, having had to recover from regaining its independence):

    “Negli ultimi trent’anni di globalizzazione accelerata, tra il 1990 e oggi – scrive il Censis nel suo ultimo Rapporto – l’Italia è l’unico Paese Ocse in cui le retribuzioni medie lorde annue sono diminuite: -2,9 per cento in termini reali rispetto, ad esempio, al +276,3 per cento della Lituania, il primo Paese in graduatoria. Lavorare in Italia rende meno rispetto a trent’anni fa e siamo l’unica economia avanzata in cui ciò è avvenuto”. È il declino e insieme la svalorizzazione del lavoro. Un processo lento ma costante. Che, dopo la dissoluzione dei partiti di massa ancorati alle classi sociali del Novecento, contribuisce a spiegare perché, in questa interminabile transizione politica, il consenso del mondo del lavoro si sia alla fine depositato in buona parte sulle forze populiste, in un crescente disincanto verso la democrazia rappresentativa.

    [I’ll translate those last two sentences sentences, which have wide consequences: “A long but constant process: Which, after the dissolution of the mass parties, based in the social classes of the 1900s, helps to explain why, in this interminable political transition [Gramsci, evoked! DJG], a great deal of the political support of the world of working people has shifted to populist forces, in a growing disenchantment with representative democracy.”

    Italy will only benefit by sitting out the Ukraine war—which is why the government has at least been making some attempts to broker a ceasefire and negotiations.

    In the long run, the U.S. elites consider Italy a place to go on vacation. So colonizing the Italian economy doesn’t matter so much as suborning the EU as a political / economic force, which is what Michael Hudson mentions (again) in this interview, a rather stark insight, but one that we will benefit by if we can accept it.

    1. drumlin woodchuckles

      Could the “pro-war consensus” in Germany be due to Germany’s legacy-heritage of antiRussianitic racist antiRussianite antiRussianism? ( A heritage matched in separate parallel by America’s own anti-American anglophillic Nazi-PaperClipping ruling elite.)

      Does anyone who doesn’t like that hypothesis have a better one? If so, this might be the place to offer it.

  4. simjam

    From Michael Hayden’s new book:
    “Fascism emerges when other parties demur from reforms that the population wants and is ready for.”

    1. flora

      an aside: See US TRoosevelt trust busting and populism. See the US New Deal and populism, for example. Those pres/Congresses made changes a large bloc of voters and citizen had campaigned for decades. They even started a 3rd party, the Populist Party, running on issues like trust busting, anti-monopoly, clean govt (instead of cronyism), etc.

      1. drumlin woodchuckles

        Unfortunately, the Populist Party decided to run “with” the Democratic Party and thereby lost its own separate existence when the Silver Tounged Self-Seeker went down in flames.

        1. John

          If “Fascism emerges when other parties demur from reforms that the population wants and is ready for.” where exactly is the US today?

  5. TimD

    The US and Europe rely on Chinese manufactures to maintain their lifestyle and demonstrate the wonders of the free market. If the Chinese raise their prices or reduce their holdings of US and Euros, the result would be higher inflation and weaker asset prices in Europe and the US. I have noticed that in the months after the US seized those foreign funds, the US stock market has been pretty flat as foreigners are maybe rethinking their investments in American companies. For years, the Chinese have been buying real estate as a way of holding/hiding assets, what happens to real estate prices if that stops or they start unloading it?

    If the US decides to start a program of import substitution, how long would it take to rebuild the infrastructure and develop skills in order to supplant a trillion dollars per year trade deficit? What would happen to prices in the meantime?

    1. ex-PFC Chuck

      re: “If the US decides to start a program of import substitution, . . ”

      I question whether that’s even possible to do in any meaningful way given the short time horizon limited, dystopian financial environment that has evolved. Wall Street won’t be able to restrain itself from bleeding companies of the funds needed for long term investment.

        1. TimD

          Yes Flora, that describes it. US companies built branch plants all over the world it order to get around tariff barriers. With all that money to be made during the Vietnam war, they started selling back into the states from plants in low-wage countries. This led to a higher margin and more profits on what they imported. Eventually they were closing American plants and moving them south. In order to help the companies, governments started pushing free trade and leaning on unions. 50 years later the country has a $1 trillion annual trade deficit.

          Like Michael said, the rest of the world facilitated this by holding US money and buying US debt. This kept the value of the US dollar high and helped them sell into the US. Americans thought life was wonderful because things were easy to buy. The trick is than in capitalism, one needs to exchange something like a good or service, in order to buy. The US has largely just been selling off assets and printing IOUs to buy stuff. It reminds me of that legend where the natives sold Manhattan Island for a bunch of beads.

        2. JGK

          Yup, Charles. The concierge model of health? care is present at 142 degrees, West, 43 degrees North (Rural SW Oregon) what’s the point of waiting for emergency services when the outcome may just be, another emergency? Truth, months to book with the FNP. Yet, if one signs up of the Concierge Service package….appointments daily, via tele health…

      1. TimD

        I agree, I don’t see it happening. There has been a shift of manufacturing from China to Mexico but not enough to make a difference.

        At some level I expect Wall Street to step in and move the government into making nice with China. Investors have been getting rich from manufacturing there for Western consumption and the growing Chinese market. I heard that it has become the largest luxury market in the world.

    2. drumlin woodchuckles

      Really? Europe too now also relies on Chinese manufactures? Does Europe already have no more manufacturing than America has?

      Is it already too late for Europe to save itself from Chinese colonization? Is Europe resigned to its fate and future as a cultural petting zoo for Chinese tourists and branch managers?

  6. nippersdad

    What a great article! Thank you for including this today.

    I have been particularly surprised at how Germany has been so willing to destroy its’ own economy; I had always viewed them as being more hard headed and practical than that. I think, perhaps, the US State Department has failed to remember that Europe has proven to be pretty good at replacing governments that it doesn’t like since 1848. As with the dismal failure of the sanctions regime to achieve regime change in Russia, Europe replacing us with their natural trading partners to the East may not be as difficult for them as they think.

    The only way to win the Great Game now is to stop playing it.

    But what happens when the East starts to fight back? Finance capital may be nice for those who benefit from it, but how does one intend to stay a first world nation when no one will sell you any of the manufactures that you have offshored? The one percent may end up with piles of money, but if it has no value then what was the point?

    1. drumlin woodchuckles

      It has value to the one percent. They still get to travel the world and invest in it and hobnob with their fellow Davos Persons in all the nicest resorts and live-in paradises of the whole planet.

      The only way the one percent can lose in a way that they can be made to feel their own loss is if every single one of them . . . and all their wives and children and grandchildren too . . . are forced to spend the rest of their lives sleeping in empty boxes behind garbage bins and dumpsters.

      1. Diogenes

        Better yet. Rolling guillotines to take off the aristocrats’ heads.
        Did it in civilized France in early 1800’s.
        Nice precedent.

        1. drumlin woodchuckles

          I am in a bad mood today.

          I would actually prefer to see them live and suffer in boxes behind dumpsters.

  7. Carolinian

    It looks like Europe is becoming an appendage of the U.S. economy, in effect bearing the fiscal burden of America’s Cold War 2.0, with no political representation in the United States. The logical solution is for Europe to join the United States politically, giving up its governments but at least getting a few Europeans in the U.S. Senate and House of Representatives.

    This seems entirely fair. If the United States is going to aspire to run the world then the spirit of democracy demands that the world gets representation in our Congress. After all “no taxation without representation” was the rationale for the whole US project. But then maybe they just meant their rights as Englishmen. They certainly didn’t include the slaves.

    Of course post WW2 the U.N.was supposed to provide representation to all those “little people” countries and its edicts taken seriously. Ironic therefore that it has been sidelined by the one country that does the most prating about democracy. Sending Nikki Haley there was by itself a crushing insult.

    1. Jeremy Grimm

      That statement caught my attention also. Might it be more than a little facetious? I cannot always tell.

      1. super extra

        I let out an involuntary hooting chuckle when I read it, but I re-read it several times because it was so disconcerting. But if they keep going along with this, well, what else can you say?

        I just don’t see the elected governments maintaining this in the face of years of depressed living standards. Then what? Macron’s two-tier Europe for those who wish to leave? Honestly that would be better than being a satellite or satrap of the US. For the quality of life for the majority of people there, not the local elites’, I mean. I guess if class is more relevant in the west than nationality it makes a very twisted sense if you’re closer to the levers of power; better to rule in hell than take fewer consumerist vacations and buy less crap in heaven.

    2. Bart Hansen

      “If the United States is going to aspire to run the world then the spirit of democracy demands that the world gets representation in our Congress.”

      I have often thought that citizens should have free shares in the weapons producing companies; Raytheon, et al., if they are so important.

    3. drumlin woodchuckles

      The 99 percent majority of Americans are already not represented in the House of Reps or the Senate. Since we are already not represented there, what makes anyone think that the 99 percent majority of Europeans would be any more represented in DC than the 99 percent majority of Americans are?

    4. MichaelSF

      If the United States is going to aspire to run the world then the spirit of democracy demands that the world gets representation in our Congress.

      Isn’t Israel’s representation in D.C. enough to count?

  8. Jeremy Grimm

    Coupled with the content of one of today’s links — “Confronting a Perfect Long Storm” — the tail of item #6: “This financial diplomacy promises to introduce “interesting times.” appears especially pregnant.

  9. Jessica

    The financialized economy is a dead end but turning around will be extremely difficult. Right now, we can’t produce what we need because we lack both the physical facilities and workers with the right skills. Training workers is not possible with education so high priced and administrator-infested. What would be necessary would be a fundamental change in cultural attitudes away from money games and word play back to physical production. That would require, as a starter, the elimination of almost the entire professional managerial class, in particular Wall Street, and including education leadership and media. There is no force in the US even vaguely capable of this. The Left is infested with careerists and paid agents of the elite. The right is ideologically beholden to corporate interests. The only cultural-ideological force that might be capable of making the necessary changes would be some type of Christian fascism, but they are easily manipulated by our current elites (who do have that one skill) and more likely to get intoxicated with pogroms against trans folks and the like than to take on the rentiers who are the true enemies of America.
    I would like to think that with the situation so clearly needing correction, this will somehow get done, but history is full of examples of empires in decline that failed to take the obvious measures to save themselves. The western Roman Empire, multiple Chinese dynasties (late Qing for example), Tsarist Russia, and the UK come to mind.

    1. drumlin woodchuckles

      We would also need to seccede from the Global Free Trade system and re-adopt strict rigid Protectionism in order to force the Outside World to allow us to redevelope these skills and facilities you write about. Unless we can reconquer the DC FedRegime governing structures from the Global Class Enemy which occupies them now, we cannot do any of this at a “national” level. And unless/until we can do that, the only thing that the mentally superior minority of people who believe in that can do . . . . is to find and buy what few made-in-America physical things still exist in order to keep those little monasteries of production alive in case there is a better future for the country around them.

      And if there is no more made-in-America examples of the particular thing that a mentally superior person wants to buy, the mentally superior people can still try finding things made by countries with an equal or better standard of social survival than America now has . . . and work our way down the ladder. Choose America first, Europe-Japan second, Korea third, MexicoTurkeyEtc. fourth, the little slave countries ( Bangladesh/Vietnam/Cambodia/etc.) fourth, and our most deadly trading enemy China last of all.

      Free Trade is the New Slavery.
      Protectionism is the New Abolition.

      1. lance ringquist

        “Free Trade is the New Slavery.
        Protectionism is the New Abolition.”

        i said that many years ago. just read up on lincoln and his advisors, and they said just that.

        what nafta billy clinton left of america, is a empty hollow burnt out shell, de-industrialized, deregulated, privatized, low tax for the rich, smoldering ruins.

        1. drumlin woodchuckles

          I supported Tom Harkin in the primaries. But it was not allowed to be.

      2. anon y'mouse

        it has nothing to do with being mentally superior.

        impoverishing the mass of society means they “need” to buy the cheapest crap from China available.

        choosing more expensive and extremely limited “made in american” (there’s lots of flim flam with that label) or european goods means you aren’t of the lower half of society worrying about rent and gas money.

        please, a bit less moral attachment to the purchase of goods. most people have very little choice about what they consume, although the packaging and ads are meant to deceive everyone about this.

        1. lance ringquist

          its a matter of economic survival. americans were forced into the dollar store economy. and the more the dollar store economy takes over, the more poor and desperate americans will get.

          plus cheap junk from nafta billy clintons communist china is not cheap. if you have to give up your standard of living and your technology, its not so cheap anymore is it?

          so standards of living falls for almost all except the gilded few.

          there is no way out of this unless we get radical and re-industrialize.

          the more cheap junk we buy, the worse it gets. have you noticed that the raging inflation is tied to imports?

        2. drumlin woodchuckles

          There is also a lot of non-flim non-flam attached to some made-in-America goods. I note that you carefully avoided my next words about buying “down the ladder” of non-slave-labor goods from non-slave-labor countries if “made-in-America” is not available.

          And when discussing the upper-half of American society which is 150 million people right there, it is fair to say that those among them who shop at Walmart for always-the-low-price-always are either stupid, vicious or deeply immoral. And the same goes for the whip cracking sadists who shop at Amazon when they do not have to.

          Until “we the people” can round up and exterminate the Free Trade supporters and operatives, ” we the individuals who care” can either keep little islands of non-slave production alive in the meantime, or not even bother to try.

  10. Kris Alman

    If NATO is the lynchpin for the EU to be subservient to the U.S., why are Finland and Sweden eager to join NATO to effectively destroy their version of democratic socialism?

    1. drumlin woodchuckles

      Because the RussiaGov has terrified them with visions of ” okay, you’re next.” The Sweden/Finland Governments/peoples have freely chosen to enter NATO and that is one of Putin’s singular big accomplishments. Or ” decccomplishments” as John Stewart might would have said.

    2. torpare

      The rush into NATO of the Finnish and Swedish populations is comparable to that of the gadarene swine, and explicable only in analogous terms – ie being possessed by demons and commensurately deprived of the power of reason.
      There’s no purpose to be served by looking for any rational explanation.

      What part might have been played by “oligarchs” behind the scenes I have no idea (I’m an expatriate resident in Finland who doesn’t speak Finnish). Lilly Lynch in New Left Review hints darkly at something of the sort here: https://newleftreview.org/sidecar/posts/joining-the-west
      (implicating the Wallenberg clan in particular) but she names no sources for her allegation, so I don’t know what to make of it. Disinformation perhaps?

      If not, and she has any solid evidence I’d dearly love to see it.

  11. Susan the other

    This all makes perfectly good sense – this is what is happening. And it makes sense of Anthony Blinkin’s “strategic ambiguity” and his mixed signals to China. But it does not make sense in the long run. The only way neoliberal financial economics can make sense is to give plenty of money back to the places from whence it came. Like Varoufakis’s advice on making sovereign capitalist-socialist economies work by spending money into the society and the economy to keep it functioning, global financial economies – the economies which have deindustrialize and must spend to trade with producing countries – are in fact a drain, environmentally, on those manufacturing-industrial economies. Without the end buyer (the neoliberal financiers) giving back to the environment this whole scheme falls apart. So the best thing the US can do if it wants to remain deindustrialize and financialized is go whole-hog into climate mitigation and environmental cleanup; restoring and preserving the planet which is the source of all our wealth. So let us all hope the we, the USA and NATO, do this. Because, if not, in the end – actually the pretty near future – everything is gonna collapse in a pile of steaming dollar bills.

  12. Kali El

    When you impoverish the masses to enrich the elite what happens? Crime increases as wealth inequality increases. And who wants to live in a world where crime is on the rise like what is happening in American cities? What good is it to have 10 billion dollars instead of 2 billion dollars if you have to live in fear of criminals everywhere you go? That is one thing that will inspire change on the American elites. Sure you can own mansions and apartments with strong security, but what kind of life is it to need a phalanx of bodyguards everywhere you go? The elite plan to import millions of very poor people to work for less and less then the local people into America and Europe was not thought up with the obvious problems of many of them turning to crime because of the continuing rising cost of living. So what is going to happen is that they will smarten up enough to see that the current plan is obviously leading to a situation where you have millions of angry and unstable poor people willing to kill you for your wallet or purse.

    There is only one solution to the continuing degradation of the public commons, which after all the elites want to enjoy. Their plans have to change. And that is what we are seeing starting to happen, which is why UBI is gaining in popularity–it is out of fear of the masses of poor people. What will happen next is a revolutionary movement in America–it is already happening with the sudden shift of many away from the Democrats and elitist Republicans in opinion polls. All it will take to harness that massive public discontent is, for example, populist leaders like Tulsi Gabbard and Ron Desantis, with backing from populist billionaires like Elon Musk, to change America. Change America and you change the world. Because even though Russia and China, Iran, etc., are not imperialist neoliberals, they are still not free, to say the least. Reality itself has a way to intrude into what appears to be beyond hope.

    1. anon y'mouse

      Mexico and other latin american places have this figured out already.

      it’s doable. they live behind private walls, with security systems and guards and have the children watched every second on the way to and from private schools. police in full militay gear including weapons (i’m not a weaponist. i’m assuming a semi-automatic type of rifle from seeing them on my trip there 20 yrs ago)roam the downtown streets. poor people don’t go to rich people areas unless to work as servants. it’s all very civilized.

      even in this country, “crime” does not happen everywhere although the walls are only puny stucco of the gated community type, and “guards” are one guy in a booth sleeping half the day away.

      yes, living rich among the poor is risky but that’s what humans seem to have acclimated to over our history quite well and the rich have done it again and again and enough of them live to pass on their property and power to the next generations who also weren’t simply murdered in their beds.

      it’s the average citizen–the fellow poors and the not-quite-poor but not rich, who end up depredated upon. and that’s just fine for the rich as long as they do it in their not-rich areas and keep it out of the high end living and shopping zones.

    2. David in Santa Cruz

      One person’s “criminal” is another person’s “revolutionary.”

      However, technology allows our symbol-manipulating elites to “work from home” in Telluride or Martha’s Vineyard, insulated from the revolting classes. They can thus postpone consequences, at least in their lifetimes. They will change nothing because they have distanced themselves from the suffering of the masses. The discontents of the general population play out as tribalism and human sacrifice, all for the greater entertainment of our elites.

      Throw another “Ukrainian” on the fire. A little more wine, my dear?

      1. Kali El

        When I wrote about crime I didn’t mean just street crime by random people, I should have been clearer: organized crime is growing at a fast rate due to poverty growing at a fast rate, not just transnational mafias but also tens of thousands of local gangs are becoming a bigger and bigger problem for the elites and their PMC class all over the world. The gangs not only look for kidnapping opportunities they also plan out schemes to rob the rich both online and in-person at tourist areas. The elite class is used to being able to travel and enjoy tourism, they are not ensconced in their homes all the time. Often only the head of the family usually works if any of the family works, often they all live off of investments in trust funds. Organized crime grows as poverty grows and that is a big reason the elites want everyone under digital management, they want to be able to stop being fearful and threatened in public by forcing everyone to use digital ids to buy anything, stay anywhere, travel anywhere, etc. That is what they hope to use to fight gangs and criminals who threaten them more and more wherever they go. They love to go to Italy, France, Greece–yet those places are filled with gangs full of poverty stricken migrants willing to do anything to survive.

  13. Hayek's Heelbiter

    I well might have missed it, but it seems that other than a mention of balance of payments and a comment regarding Italy, much of the post uses “Germany” and “Europe” interchangeably. There are quite a few other countries in the EU .
    An aside. I often wonder why the German Green-influenced volk, instead of moaning about the lack of oil and gas, shouldn’t instead feel overwhelmingly proud and virtuous of the fact they will be shutting down the last German nuclear power plant this December, and loudly trumpet this achievement to whoever might listen.
    Back to my lede, I have not heard a single word about France and the fact it produces 80% of energy from nuclear and hydro.
    Can anyone in the NC commentariat enlighten me as to what the French position on the importation of Russian oil and gas is?

  14. Mikel

    Which begs the question: What has the USA promised the EU elites?

    The crisis brewing in the Global South would benefit the USA by driving immigration here to put more downward pressure on wages. After all, they have to get some of the manufacturing back in the USA if they want to continue to saber rattle against China. They recognize this only as a national security measure.

    That said…just spitballin’ here…what if the promise is to bring more of the knowledge/design jobs and/or headquarters to Europe?
    Just think, the PMC of the USA could move to a continent with gun control. ;)

    1. DZhMM

      What has the US promised to EU political elites? For sure at least some of them it promised back what it promised Bustani back when he wasn’t getting with the program on Iraq – “We know where your children go to school”.

      The United States is a cancer on the world. Perhaps when it is broken, something redeemable can be drawn from the pieces. Hopefully (I have friends and family there) enough of the ones suffering under it today will be merciful instead of just, and we will get a chance to find out.

      1. drumlin woodchuckles

        Well . . . thank you for sending over your best and brightest to get the party started, eh?

  15. Ludus57

    Professor Hudson does it again!
    One clear victim in all these shenanigans is the UK Labour Party. Jeremy Corbyn’s successor, Keir Starmer, is a good buddy of Eric Houlder, former Obama Attorney General.
    Starter’s project to marginalize the Labour Left fits into all of this, with reference to gagging political opposition in Western Europe. And his involvement in the Assange case, whilst UK Director of Public Prosecutions, fits his apparent pro-Atlanticist stance. Clearly, he will do whatever any US administration would want.
    Well I never!

    1. drumlin woodchuckles

      Only if its a Free Trade Atlanticist Administration.

      If Americans could reconquer America and install a Zero Free Trade Protectionist Administration, he would join the International Free Trade Conspiracy in trying to topple that Administration.

      ” I like the way you think.”

      ” Oh? Well, that’s because I think the way you like.”

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